Areva agreed to pay $7.75 a share, Johannesburg-based UraMin said today in a statement. That's 4.6 percent more than UraMin's closing price in the U.S. yesterday and 7.6 percent more than on June 11, the day before UraMin first said it was in talks.
The acquisition will give French state-owned Areva mining- exploration projects in Namibia, South Africa and the Central African Republic that have yet to start production. The price of uranium has jumped more than sixfold in three years because of resurgent demand for nuclear power caused by concern about pollution from plants powered by fossil fuels such as coal.
``This is essentially the French government buying major uranium deposits in Africa to ensure its supply of a strategic resource,'' Kevin Bambrough, a strategist at Toronto-based Sprott Asset Management Inc., UraMin's second-largest shareholder, said in a telephone interview. ``This is extremely bullish for the uranium sector.''
Shares of UraMin rose 31 pence, or 8.2 percent, to 408 pence ($8.06) in London, indicating some investors anticipate a better offer. The stock has almost tripled in London this year.
Higher Offer
``Shareholders are going to hold out for a higher offer,'' said John Meyer, a mining analyst at Numis Securities Ltd. in London. ``It's a company with assets on the way to development. This could be attractive for other bidders.''
Possible rival bidders include BHP Billiton Ltd., Anglo American Plc and Rio Tinto Group, the world's three largest mining companies, and Uranium One Inc., which is developing South Africa's largest uranium deposit, Meyer said. Shareholders will probably hold out for about 450 pence, he said.
The French nuclear company has a market value of 27.3 billion euros ($36.5 billion). Its investment certificates dropped 17.94 euros, or 2.3 percent, to 771.06 euros in Paris. The certificates are nonvoting shares that represent about 4 percent of Areva. The government owns the rest.
Break Fee
Areva has an option to match any offer and agreed to a $75 million break fee if UraMin accepts a rival bid. About 20 shareholders, who together hold about 25 percent of UraMin's stock, agreed to accept the bid in the absence of a better one, Olivier Mallet, Areva's senior executive in the mines chemistry department, said today. Areva already owns 5.5 percent of Uramin.
Galahad Gold Plc, which owns 6.4 percent of UraMin on a fully diluted basis, said it plans to hold a shareholders' meeting to gauge support for the bid.
Areva wants to ``secure, on a long-term basis, uranium supply for our customers in a very tight market situation,'' Mallet said on a conference call with analysts. ``It is a friendly offer and, we believe, a very attractive one.''
Before the UraMin bid, Areva planned a doubling of its current production of 13.2 million pounds by 2012. UraMin's deposits will add another 15.4 million pounds once they're developed, Mallet said.
Uranium Prices
Uranium prices will rise through at least 2009 and won't ``stabilize'' until after 2015, Lehman Brothers Holdings Inc. forecast in a June 8 report. Uranium will average $120.06 a pound this year, rising to $167.49 in 2009, the bank said. Prices will probably drop below $70 in 2017. Uranium sold for $6.75 a pound as recently as 2001.
Companies are paying rising premiums to gain uranium assets. Uranium One paid 2.9 times UrAsia Energy's total assets in a $3.25 billion purchase in April, according to data compiled by Bloomberg. Areva is offering 16 times UraMin's 2006 assets.
Areva was formed in 1999 by the merger of two French state- owned companies: nuclear fuel company Cogema and reactor builder Framatome ANP, a combination designed to give it the scale to compete with rivals such as General Electric Co.
The French company's fuel operations include mining, enrichment and production of fuel assemblies, grids of uranium- filled metal tubes that go into nuclear reactors.
Soaring costs for oil, gas and coal, and the suspicion that the carbon dioxide they emit may be contributing to extreme weather, are renewing interest in nuclear power. First Uranium Corp., a developer of uranium mines in South Africa, estimates that annual demand from utilities is outpacing supply by about 70 million pounds (32 million kilograms).
French Plants
The French government is betting big on nuclear. State- owned Electricite de France SA runs 58 nuclear plants that provide 78 percent of the country's electricity.
Along with the projects in Namibia, South Africa and the Central African Republic, UraMin has projects in Chad, Niger, Senegal and Mozambique, according to the company's Web site. It also has a joint-venture project in Canada.
Globally, there are 437 nuclear power plants across 30 countries, with 30 more being built, 74 planned and 182 proposed, according to Lehman Brothers.
Bloomberg
by Danielle Rossingh
